The Insurance Regulatory Authority (IRA) has been sued by the Consumer Federation of Kenya (Cofek), which is accusing the regulator of allowing insurers to continue operating despite their ongoing breaches.
The court case at the Milimani High Court was filed after Cofek had earlier engaged the regulator on the matter including the operation of 24 insurers that allegedly lack the required capital.
Insurers are required to maintain the set capital requirements to protect the interest of policyholders who are only compensated to the tune of Sh250,000 when an underwriter collapses.
In a letter seen by the Business Daily —and which forms part of the court documents in the case filed by Cofek— IRA chief executive Godfrey Kiptum had told the consumer lobby group that it was working to address the issues raised.
“I acknowledge the receipt of your letters dated 14th August 2023 and 1st September 2023 on the captioned subject and note the contents therein,” he said in a letter to Cofek secretary-general Stephen Mutoro dated September 18. The Cofek has provided the letter as part of its filing.
“The authority appreciates your concerns and wishes to reiterate that we are taking the necessary regulatory steps to ensure that all our insurers are financially viable,” added Mr Kiptum.
In the petition filed on October 3 before Justice Enock Chacha Mwita, the Cofek accuses the IRA of not dealing with errant insurers by compelling them to raise their capital levels.
Scores of insurance companies are yet to comply with the capital adequacy rules, with some failing to file their financial statements with the regulator on the set frequency.
“It is clear that majority of the insurers (who include but are not limited to the 4th to 24th Respondents do not meet the minimum capital adequacy ratios as specified within the Schedule to the Insurance Act, Cap 487 and ought not to be registered and or allowed to continue receiving premiums from unsuspecting consumers and other members of the general public,” Cofek said in the court papers.
In Kenya, the Insurance Act requires a composite insurance company —an insurer that offers both short and long-term insurance business— to hold a minimum level of paid-up capital of Sh1 billion.
For a company that offers only short-term insurance business, the minimum capital requirement is Sh600 million while that of Long term is Sh400 million.
